EuroResource--Deals and Debt

Recent Developments

U.S. and U.K.—On 29 December 2011, the U.S. Court of Appeals for the Third Circuit, in In re Nortel Networks, Inc., 2011 WL 6826412 (3d Cir. Dec. 29, 2011), affirmed lower court rulings enforcing the automatic stay against the Trustee of the Nortel Networks U.K. Pension Plan and the U.K. Board of Pension Protection Fund ("PPF"). The stay was with respect to their participation in U.K. pension proceedings initiated by the U.K. Pensions Regulator ("TPR") to determine the extent of the liability of Nortel Networks UK Limited and its affiliates, including two U.S. chapter 11 debtors (Nortel Networks, Inc. and NN Caribbean and Latin American), for an underfunded defined benefit pension scheme established and governed by U.K. law. The Third Circuit ruled that the Trustee and PPF failed to demonstrate that the proceedings fell within the "police power exception" to the automatic stay contained in section 362(b)(4) of the U.S. Bankruptcy Code. According to the Court of Appeals, neither the Trustee nor PPF was a "governmental unit" qualifying for the exception, and although TPR was a governmental unit, it was not a party to the bankruptcy proceedings and therefore could not assert the police power exception. In addition, the Third Circuit concluded that the U.K. proceedings were focused on the pecuniary interests of PPF and the members of the pension scheme, rather than the protection of public health or safety.

Previously, on 14 October 2011, the England and Wales Court of Appeal in the U.K. unanimously upheld the High Court's 2010 decision that Contribution Notices ("CNs") and Financial Support Directions ("FSDs") issued by TPR after a company was placed into administration would rank as an expense of the administration and as such was payable out of floating charge realizations in priority to the administrator's own fees, costs and expenses. The Court of Appeal rejected the argument that an FSD or CN could be a provable debt if it was issued after the company was placed into administration because the relevant insolvency legislation requires a provable debt to be "an obligation incurred before that date." The Court of Appeal considered that liabilities pursuant to an FSD or CN did not arise until an FSD or CN was issued. As a consequence of this decision, we now have a situation whereby, if an FSD or CN is issued prior to a company being placed into administration, it is provable debt and as such will rank as an unsecured claim. However, if the FSD or CN is issued after a company has been placed into administration, it will rank as an expense of the administration. It is generally considered that Parliament could not have intended that the ranking of an FSD or CN would vary depending on when it is issued. Accordingly, the Court of Appeal granted permission to appeal its ruling to the Supreme Court on 2 November 2011. The appeal is expected to be heard in Spring 2012.

U.K.—The Court of Justice of the European Union ("CJEU") has held that the EC Insolvency Regulation ("ECIR") will take priority over national laws regarding the jurisdiction of opening proceedings. In Mediasucre International, the main insolvency proceedings had been opened in France in respect of a French registered company. French law provides that where assets of another company are intermingled with an insolvent company, that second company may be brought into the first company's proceedings. Using that law, Mediasucre's liquidator applied to have an Italian registered company brought into Mediasucre's proceedings, as their assets had been mingled. The French Court of Appeals held that it was permissible since separate proceedings were not being opened in respect of the Italian company. The CJEU disagreed, holding that the practical effect of joining the second company to the proceedings was the same as opening proceedings for the second company; therefore, the ECIR must apply. The CJEU then needed to decide where the centre of main interest ("COMI") was for the Italian registered company, in order to establish where proceedings should be opened. The CJEU considered, and followed, the previous cases of Eurofood and Interedil, holding that the COMI must be identified by reference to criteria that are objective and ascertainable by third parties, and particular weight must be given to the place where the central administration of the company takes place. This decision is consistent with and reinforces the principle that the ECIR should take precedent over national laws with regard to the jurisdiction of insolvency proceedings.

France—On 19 January 2012, the Appeals Court of Versailles confirmed a decision opening the safeguard proceedings (procédure de sauvegarde) of Heart of La Défense SAS ("HOLD"), owner of the Coeur Défense building, Europe's largest office complex, and its Luxembourg-based holding company Dame Luxembourg. On 8 March 2011, the Court of Cassation, France's highest judicial court, reversed a ruling by the Paris Court of Appeal dated 25 February 2010 holding that HOLD and Dame Luxembourg were not entitled to court protection in France under the safeguard procedure, which was initially granted by the Paris Commercial Court in November 2008. The Court of Cassation ruled that safeguard proceedings are open to companies facing difficulties of any kind, not merely operating difficulties. In light of the Supreme Court decision, the Versailles Appeals Court ruled that acceleration of acquisition financing debt threatened by HOLD's creditors amounted to "difficulties" that justified the opening of safeguard proceedings. The ruling is also significant because the Appeals Court determined
that the COMI of Dame Luxembourg is in France. This means that, despite recent European Court decisions such as Interedil, there is still some room to rebut the presumption that COMI is situated at the location of a company's headquarters. It also means that the opening of safeguard proceedings by other CMBS debtor entities would not be surprising in the coming months.


Jones Day advised the Los Angeles-based private equity firm Aurora Resurgence in the acquisition of the French group Alltub from Naxicap Partners. Alltub is a global leader in manufacturing aluminum collapsible tubes and was formerly majority-owned by Naxicap Partners as majority shareholder. Naxicap Partners is a subsidiary of Natixis Private Equity. The group employs 1200 people in its five factories, including those at Saumur and Bondoufle (Essonne) in France. Alltub also has manufacturing sites in Italy, the Czech Republic and Mexico. Alltub has net annual revenues of 120 million Euros. The acquisition of Alltub, which closed on 7 December 2011, will enable Aurora Resurgence to strengthen its leadership in the global market of aluminum tubes and marks the first significant European transaction for Aurora Resurgence.

Jones Day is advising SunPower Corp. ("SunPower"), a Silicon Valley-based manufacturer of high-efficiency solar cells, solar panels and solar systems, in connection with SunPower's agreement to acquire Tenesol SA, a global solar provider headquartered in La Tour de Salvagny, France, for USD165.4 million in cash. Tenesol, a wholly owned subsidiary of Total SA, has operations in 18 countries and solar panel manufacturing facilities in France and South Africa. The transaction is expected to close in early 2012.